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HMRC aims to stay claims for compound interest
HMRC are set to appeal against the High Court judgment in the Littlewoods VAT case, which the department says was too specific to the appellant firm to apply to similar instances.
The retail company had claimed a refund of overpaid VAT in respect of commissions on mail order sales. When the Revenue made the repayment with simple interest due, the taxpayer argued it was entitled to compound interest.
The matter moved to the Court of Justice of the European Union, which ruled there was no EU right to compound interest. The case returned to the UK courts to determine whether the country’s interest provisions complied with EU principles.
Mr Justice Henderson in the High Court decided compound interest was due, taking into account the “exceptional” circumstances of Littlewoods’ situation.
The judge also held that the current statutory provisions relating to VAT provided an appropriate amount of interest in many cases.
HMRC do not agree with the judgment in Littlewoods Retail Ltd and others v CRC [2014] EWHC 868 (Ch) and have received permission to take the matter to the Court of Appeal.
The department believes the judgment’s guidance about the availability of compound interest was too specific to the claimants to be considered in similar High Court cases.
Revenue & Customs Brief 20/14 states the Revenue will apply for claims for compound interest to continue to be stayed, pending the final determination of the Littlewoods litigation. New requests will be refused.
The tax authority said it will reconsider its position in the event its appeal is unsuccessful.
